Preventing Collusion in Procurement: A Primer

HANDBOOK OF PROCUREMENT, Nicola Dimitri, Gustavo Piga, Giancarlo Spagnolo, eds., Cambridge University Press, 2006

34 Pages Posted: 21 Apr 2006

See all articles by Giancarlo Spagnolo

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Gian-Luigi Albano

University College London, Italian Procurement Agency (Consip S.p.A.)

Paolo Buccirossi

Laboratorio di economia, antitrust, regolamentazione (LEAR)

Matteo Zanza

Arthur D. Little, SPA.

Abstract

In softening price competition at the tendering stage, a bidding ring may jeopardize the buyer's effort to award a procurement contract at her most advantageous economic conditions. By exploiting the similarities between oligopolistic and procurement markets, we discuss how structural conditions of the procurement market such as the presence of barriers to entry, demand fluctuations, frequency of interactions among suppliers and market transparency affect the sustainability of collusive agreements among participants in a tendering process. We then evaluate the extent to which some aspects of the tendering design such as the choice of tendering format, and in particular of the scoring rule, the constraints on bidding consortia and subcontracting may enhance price competition and limit the risk of successful bid-rigging.

We also review one case of "suspected" coordinated bidding in the procurement market for a pharmaceutical product in Italy, and provide a detailed account of the collusive agreement put in place by a cartel in the "Lunch Coupon" market, also in Italy, that was uncovered and convicted by the Italian Antitrust Authority.

Keywords: procurement, oligopoly, collusion

JEL Classification: H57, D43, L41, K21

Suggested Citation

Spagnolo, Giancarlo and Albano, Gian-Luigi and Buccirossi, Paolo and Zanza, Matteo, Preventing Collusion in Procurement: A Primer. HANDBOOK OF PROCUREMENT, Nicola Dimitri, Gustavo Piga, Giancarlo Spagnolo, eds., Cambridge University Press, 2006. Available at SSRN: https://ssrn.com/abstract=896723

Giancarlo Spagnolo (Contact Author)

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

Gian-Luigi Albano

University College London, Italian Procurement Agency (Consip S.p.A.) ( email )

Gower Street
London
United Kingdom
+39 06 8544 9627 (Phone)

Paolo Buccirossi

Laboratorio di economia, antitrust, regolamentazione (LEAR) ( email )

Via di Monserrato 48
Rome, 00186
Italy
+39 066 830 0530 (Phone)

Matteo Zanza

Arthur D. Little, SPA. ( email )

Via Sardegna 40
Rome, RM 00187
Italy
+39 06688821 (Phone)

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